Six years ago Capital Stage was a small investment holdingcompany. Today it is a renewable energy utility producing nearly200 megawatts (MW) of solar and wind power that posted operatingearnings of 25 million euros in 2011.

"When the financial crisis broke out we decided to changeour business model and generate steady returns," says Goedhart,Capital's chief executive. "This is why we became an operator ofpower plants."

Germany's energy industry needs to achieve a similartransformation on a massive scale to meet a looming capacity gapprompted by the government's decision to exit nuclear power.

But it will not be straightforward. Goedhart's firm is oneof only a few profitable companies in the green energy sectorand replacing nuclear with renewable power will mean fixing manyproblems in the fledgling industry in order to secure backers.

Questions about predictability of earnings and legalliabilities are worrying some investors. Others have fallenvictim to the financial crisis that provided such inspirationfor Goedhart: banks that would previously have provided fundingnow want safer investments, to comply with new laws.

If Germany's energy revolution -- heralded as the"Energiewende" -- succeeds, it could become a model for otherindustrialised countries seeking to curb both greenhouse gasemissions and their dependence on imported energy.

If it fails, the backlash will be huge.

ACHILLES HEEL

Germany's nuclear reactors provided 23 percent of thecountry's power supply in 2010 and 18 percent in 2011. Havingscrapped the reactors in the wake of Japan's Fukushima disaster,Germany wants at least 35 percent of its power to come fromgreen energy, up from 25 percent now.

That's some way ahead of European Union targets that setcountries the challenge of meeting 20 percent of their powerneeds with green energy by 2020.

At the forefront of Germany's efforts to plug the gap isoffshore wind power, which near-neighbour Denmark currently usesto supply a quarter of its electricity.

But wind power is also the project's Achilles' heel.

Offshore wind farms are expensive to build and maintainbecause of their huge size and the logistics of constructing andrepairing platforms. This makes profitability hard to predict.

In addition, grid operators are reluctant to build powerlines out to sea because they have to pay compensation shouldthey break down. So many wind farms could lack the means totransfer the power they are generating back to the mainland.

Berlin wants to have more than 10,000 megawatts (MW) of o ffshore capacity installed by 2020, and 25,000 MW by 2030, toreplace 20,500 MW in nuclear capacity gone by the end of 2022.

So far only 220 MW in offshore capacity has been installed .

Experts predict the state will have to provide guarantees -- such as its proposal last month to pay compensation for anygrid connection delays -- in order to bring in more backers andget its targets back on track.

PRICE TAG

The cost of the project is huge. Estimates range from 85billion euros for new plants and transmission infrastructure towell above 300 billion euros if support payments to green powerproducers ar e included.

"The need for investment for the energy shift is enormous.We assume that in the area of electricity, 27 billion euros willbe needed every year until 2020," said Ulrich Schroeder, chiefexecutive of German state development bank KfW.

KfW plans to offer some 100 billion euros in loans for greenenergy projects over the next five years, as well as a 5billion-euro programme to invest in 10 offshore wind facilities.

Commercial banks, a traditional source of finance, are nowreluctant to step in because new rules forcing them to hold morecapital and to make fewer risky investments discourage thelong-term lending that infrastructure projects require.

Insurers too are worried that new rules in their sector,known as Solvency II, will force them to set aside too muchcapital as a buffer against any energy projects going wrong.